Israeli military leader under fire over stock sale

JERUSALEM—With Israelis seeking to blame someone for problems in its one-month conflict with Hezbollah, the disclosure that the military's chief of staff liquidated his $27,500 stock portfolio on the first day of the fighting was spinning Wednesday toward a full-blown national scandal.

Israeli newspapers declared air force Lt. Gen. Dan Halutz's career in the balance after he confirmed that he sold his portfolio July 12, the same day that Hezbollah snatched two Israeli army reservists in Israel, triggering the combat.

Halutz said the controversy was a cheap shot. He said he'd asked his secretary to call his banker before he learned of the abduction. It was a coincidence that the sell order came after Israeli troops stormed into Lebanon in a failed effort to free the soldiers.

Dore Gold, a former Israeli ambassador to the United Nations, called the controversy a sideshow but said it reflected Israeli concerns that the military was ill-served by its leaders and ill-prepared for the Lebanon campaign.

"The outrage feeding this story is that Israelis in all walks of life put behind them their personal financial interests. They closed businesses, put on uniforms and went to battle," he said. "Then they read that the chief of staff of the army had time to deal with his securities portfolio."

Halutz has been criticized for not sending in ground troops for the first two weeks of the fighting. Reservists have complained that their warehouses were missing gear supposedly set aside for war, from goggles diverted to active-duty soldiers in the Gaza Strip to other supply shortages blamed on budget cuts.

Moreover, the weeks of fighting failed to meet what Israeli leaders said were their goals: Hezbollah is still armed, and the abducted soldiers, Ehud Goldwasser and Eldad Regev, are still captive.

Still unclear is who leaked the ostensibly private stock transaction to the Maariv newspaper, which published it Tuesday, sparking a frenzy of speculation that Halutz, 58, a former Phantom fighter pilot with 40 years of service, would be made a scapegoat for the conflict.

The stock scandal dominated television news and radio talk shows Wednesday, eclipsing the pending indictment of a parliament member on charges of giving government jobs to political cronies and a police investigation of the justice minister on sexual-harassment allegations.

The newspaper Haaretz ran a reconstruction of the chain of events July 12:

9 a.m. Hezbollah attacks an Israeli army patrol, kills three soldiers and takes two to Lebanon.

9:30 a.m. Hezbollah TV reports the kidnapping.

10 a.m. Israeli forces start shelling Lebanon as the stock exchange opens in Tel Aviv. It was down, because of fighting in the north.

12 p.m. Halutz sells his portfolio in a call to his bank branch in Tel Aviv.

"I think it's a Shakespearean affair, much ado about nothing," said retired Maj. Gen. Shlomo Gazit, who's an expert at Tel Aviv University's Jaffee Center for Strategic Studies. "I assume that somebody doesn't like the chief of staff, and he thought that this would put some blemish on him and that's all."

Halutz's initial response Tuesday—that his personal finances were nobody's business—struck some Israelis as imperious after northern citizens spent a month in bomb shelters or crammed into friends' homes out of Hezbollah rocket range while reservists left their families and businesses under mobilization orders that had crackled through the country in secret codes.

By Wednesday, Halutz had amplified his explanation: He'd already divested two-thirds of his portfolio on the advice of a financial counselor and had decided to sell the rest before the crisis.

That's not likely to keep him out of the firing line. Several investigations of the war's conduct are expected, and Defense Minister Amir Peretz on Wednesday named former chief of staff Amnon Lipkin-Shahak, 62, a onetime paratrooper, to head a commission that's charged with looking into the military's management and preparation.